Govt Notifies Leasing Rules for Offshore Wind Energy Projects

The Central Government has notified the Offshore Wind Energy Lease Rules, 2023, to regulate the grant of lease of offshore areas for offshore wind energy and wind transmission projects.

These rules would be administered by the Ministry of New and Renewable Energy which is the nodal ministry for the development of offshore wind energy as per the National Offshore Wind Energy Policy, 2015.[1]

In September 2023, the said Ministry published a Strategy Paper for Establishment of Offshore Wind Energy Projects which outlined three models to accelerate the process of development of offshore wind farms in India. One of the models envisaged providing central financial assistance in the form of viability gap funding whereas the other two models proposed under the paper did not involve any such funding. Certain components, with modifications, of Model – B described in said paper have been incorporated in the 2023 Rules. In the same month, a tender was issued by the Ministry for offshore wind energy projects at seven sites off the Tamil Nadu coast.

Leasing out of offshore areas

Rule 5 specifies that offshore areas within the exclusive economic zone (EEZ) of the country, which extends up to 200 nautical miles from the coastline, may be leased out by the Central Government for offshore wind energy and wind transmission projects provided that the prescribed conditions are fulfilled. On execution of the lease agreement, rights over seabed within the EEZ would be granted to the lessee for a fixed term against payment of the lease amount.

A lease would cover 25 to 500 square kilometres of area depending on the project’s size and would be valid for 3 years for resource measurement and related study or survey activities. The term of the lease is extendable by 2 years. Any assignment or transfer would require written permission from the Central Government. The lessee has to hand over the lease area upon termination of the lease and comply with other requirements as laid down under Rule 17. Further, several obligations have been cast on the lessee, such as indemnification of the Central Government or its assignees from liabilities, insuring the equipment, men and third parties during operations, etc.

The Central Government is authorised to cancel the lease if the lease period remains unpaid for more than 3 months. To ensure compliance with the rules, an agency may be nominated by the Central Government, which would also assume specified supervisory functions.

Dispute resolution through arbitration

According to the 2023 Rules, an attempt has to be made to amicably resolve the disputes and after the matter is considered by a committee, it would be referred for arbitration.

Takeaways

Our Partner, Sushant Shetty shares his views: “In light of the fact that India does not presently have any offshore wind energy projects, these new landmark rules will be vital in pioneering this new untapped form of renewable energy. Apart from covering lease-related points regarding the lease tenure, rights of lessee, payments of deposit and annual fees, termination etc. as well as other points of a technical nature, the rules also allay any security and environmental concerns by providing for prior clearances from the Ministry of Defence, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Environment, Forest and Climate Change, Department of Space and Ministry of Ports, Shipping and Waterways. Like any new legislation, we expect that the rules will likely undergo various changes and amendments in the time to come, but for now, this appears to be a welcome first step in the right direction.”

A lease would cover 25 to 500 square kilometres of area depending on the project’s size and would be valid for 3 years for resource measurement and related study or survey activities. The term of the lease is extendable by 2 years. Any assignment or transfer would require written permission from the Central Government. The lessee has to hand over the lease area upon termination of the lease and comply with other requirements as laid down under Rule 17. 

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